IntelGenx Technologies Corp.

Rich Cockrell - Cockrell Group, IR Horst Zerbe - President and CEO Andre Godin - CFO John Durham - VP of Manufacturing Operations

Swayampakula Ramakanth - H.C. Wainwright Greg Ison - Singular Research Patrick Tully - Endeavor Asset Management

Thank you, Brenda and to the audience, good morning, and thank you for joining us today for the IntelGenx second quarter management update call. With me on the call today are Dr.

Horst Zerbe, President and Chief Executive Officer; as well as Andre Godin, Executive Vice President and Chief Financial Officer; and John Durham, Vice President of Operations. During the course of this call management may make certain forward-looking statements regarding the company’s future events and future performance.

These forward-looking statements reflect IntelGenx’s current perspective on existing trends and information, which can be identified by such words as expect, plan, will, may, anticipate, believe, should, intends, and other words of similar meaning. Any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including those noted in the Risk Factor section attached as an exhibit to the company’s current report on Form 10-K.

In addition any unaudited pro forma financial information is preliminary and does not purport to project to future financial position or operating results of the company. Actual results may differ materially from those indicated on this call.

For the benefit of those of you who may be listening to the replay, this call was being held and recorded on Tuesday August 11h at approximately 9 am Eastern Time. Since then the company may have made additional announcements, please refer to the company’s most recent press releases and current filings with the SEC.

IntelGenx declines any obligation to update these forward-looking statements except as required by applicable securities law. Now with that I’d like to turn the call over to Dr.

Horst Zerbe. Go ahead Horst.

Thank you, Rich, and thanks to everybody on the call for joining us today. Initially I would like to say that I am very happy to be joined by our new colleagues Andre Godin and also by our VP of Operations, John Durham.

We will - or I will in my introduction provide an overview of some of the highlights of the second quarter and I would like to focus particularly on first of all the executive appointment with Andre being on board. Secondly briefly discuss the sales of our Forfivo product, that will be followed by a financial review and then finally we will provide a facility update.

I’d like to start out though with the introduction of our new Executive Vice President and CFO, Andre Godin, who as I mentioned before we are very happy to have on board. Andre has vast experience as an executive.

He was before, joining IntelGenx, Interim CEO at Neptune and also the CFO at that company as well as for their two subsidiaries. He has overall over 25 years of experience in the biotech and pharma space and he will be officially on board effective August 24, 2015.

Let me now proceed with some comments on Forfivo and on other products. Initially Forfivo XL as you all know this is our first commercial product.

It was launched in U.S. in October 2012 under a commercialization license that we awarded to Edgemont Pharmaceutical.

Now the sales in the second quarter have increased as we expected. They grew by 19% over the first quarter and have now reached $4.7 million.

And consistent with that the scripts also grew very significantly by a factor of 14% if we look at quarter-over-quarter. There was one significant development in the last quarter.

I should say very recently our commercialization partner Edgemont reached a milestone of $7 million of net trade sales in the preceding 12 months, in the month of July. Now that milestone achievement triggers a milestone payment of $3 million in total.

These $3 million are payable in tranches. We will receive $1 million immediately and the balance of $2 million six months later.

Andre in his financial update will comment further on that. Moving on to our erectile dysfunction product, as you all know we have been working for quite some time on an oral film containing tadalafil.

The brand product is Cialis now and very recently, actually within the past three weeks, we received the results from a pilot bio study that we conducted with that film versus the reference product Cialis tablets. And the result was that we were able to demonstrate full bioequivalency of our film with the reference product.

That is a very significant result for us because this enables us to move forward with the development and more particularly with the preparations for an NDA submission which is planned to occur early next year. The reason why this is important is that the substance patent for tadalafil expires in late 2017 and with a submission of the NDA early next year we can expect product approval by mid-2017 which means that we will be ready for launch of the product immediately upon expiry of the substance patent later in 2017.

What I would also like to mention is that we will manufacture the commercial supplies of that product in our manufacturing facility that we’re currently in the process of establishing and my colleague John Durham is going to comment on that later on. I’ve received a number of questions from investors regarding the status of our PAR projects.

We have a total of three projects that we’re developing jointly with PAR and most importantly on any impact of the acquisition of PAR by Endo Pharmaceuticals. Now first with respect to the status of the projects.

The first one has been in front of FDA for now a little over two years. We submitted an ANDA together with our partner, PAR in July of 2013.

The review is progressing very well and the manufacturing site has been inspected by FDA. Now the company reported previously that together with our partner PAR we were sued by the brand company under Paragraph 4.

Now the lawsuit is progressing well. The court case has been scheduled for November of this year and both our partner and ourselves remain very confident that the outcome of the legal proceedings will be positive for IntelGenx and for ourselves and we continue to project an approval of the product by late 2016 or at the latest early 2017 and we’re gearing up for a launch of the product in 2017.

The second product that we are working on with PAR is also progressing well. As before we’re not yet have liberty to disclose the actives - or the active in that product.

And we are in the process of manufacturing pilot batches, submission batches in other words and we have on tract for submission of the ANDA early next year. And then finally the third product, again we are not at liberty to disclose the active in that product, is also progressing well however.

This is still at a relatively early stage. We are right now, we have completed the manufacturing of a pilot bio-batch and we will conduct a pilot bio study in the next month which will then give us an indication as to how to further proceed with the product.

We are right now targeting for a submission of an ANDA in the second half of next year. Now as I mentioned before I’ve received a number of enquiries regarding any impact of the recent acquisition of PAR by Endo Pharmaceuticals, and at this point I can state very clearly we don’t see any impact.

And the projects are progressing at the same pace and with the same priority as they have prior to the acquisition. We had conversations with PAR management and from these conversations we did not receive any indication that there would be any impact of this acquisition on the - both priority of those projects as well as the speed, pace at which they are progressing.

And with that I would like to turn over to Andre Godin to provide you with an update on our Q2 financial results.

Thank you Horst and thank you all for welcoming me to IntelGenx. I am looking forward to working with the rest of my new team to see how we can continue to grow and improve this great company.

We had a very exciting second quarter here at IntelGenx. Revenue were $585,000 for the three month period ended June 30, 2015, coming in more than three times higher than Q2 2014 at $160,000.

Revenues were $1.2 million for the six month period ended June 30, 2015 compared to the first six months of 2014 at $382,000, an increase of 217% over last year corresponding period. Current year sales relate exclusively to Forfivo XL via our partnership with Edgemont.

Revenues for the six months period included $784,000 of license revenue and $426,000 of royalty income. These revenues are roughly three times higher than the first half of 2014 and management believes that year-over-year quarterly sales growth will be maintained throughout the second half of 2015.

Operating cost and expenses remained stable at $1.456 million during the first six months of 2015 versus $1.450 million for the corresponding period of 2014. IntelGenx generated an operating loss of $246,000 during the first six months of 2015 compared with an operating loss of $1.068 during the first six months of 2014.

The net loss was $328,000 for the first six months of 2015, down from $1.056 million during the first six months of 2014. This translated into a $0.01 loss per share for the first six months of 2015 compared with a loss per share of $0.02 for the first six months of 2014.

Finally cash on hand as of June 30, 2015 was $2.7 million compared with $4.4 million as at December 31, 2014. As was previously mentioned we are pleased to announce that our licensing partner, Edgemont Pharmaceuticals reached cumulative net trade sales of Forfivo XL of more than $7 million.

This triggers a onetime milestone payment of $3 million of which $1 million is payable immediately and the balance in six months. We are making significant progress reaching our objective of positive cash flow by the end of our current fiscal year and this new milestone should be a big contributor to meeting our objective.

Going forward we will continue to maintain strong financial discipline as we further enhance working capital and build on our growth initiatives. I will now turn over to our VP of Operation, John Durham for review of status of the new facilities.

Thank you, Andre. I am happy to report the excellent progress we made on establishing our manufacturing facility, for our growing portfolio of versatile drugs.

Construction is well underway and we expect to be able to move into the facility in late September. Operations should begin in the fourth quarter of this year with commercial manufacturing being ready to commence in 2017.

The project is being financed by cash on hand and government backed financing of up to $3.5 million with BMO, Bank of Montreal. On March 16, 2015 we received C$500,000 approximately US$430,000 in cash from BMO.

The credit facility is supported by a 50% guarantee under the export guarantee program from Export Development Canada, Canada’s export credit agency. Management expects disbursement of the remaining C$3 million, US$2.6 million to follow after BMO has reviewed in August of 2015 our operating results for the first six months of 2015.

The credit facility may be drawn down in multiple disbursements over 12 months and after a six months moratorium on the capital has a repayment term up to 60 months. Financial covenants of the credit facility require us to maintain a minimum debt service coverage ratio of 1.25 to 1, and a maximum total debt to tangible net worth ratio of 2.5 to 1.

Based upon current business forecasts and projections management believes we will be able to fully comply with these financial covenants. We intend to use the funds for the purchase and installation of new equipment for the new state of the art manufacturing facility.

On March 16, 2015 we placed an order for two packaging machines being manufactured by Harro Höfliger GmbH and installed in our new facility. Harro Höfliger is widely recognized as a leading supplier of production packaging equipment primarily to pharmaceutical and medical device industry.

The equipment has been designed and is being built to meet our specifications and requirements. Our orders consists of one commercial scale packaging machine and one smaller machine for our R&D development and scale-up activity.

The order in the amount of approximately EUR1.5 million or US$1.6 requires payments of a 20% deposit and a further 70% to be paid upon delivery of each machine and the balance of 10% to be paid upon satisfactory completion of the site acceptance tests of each machine. The packaging machine for our R&D laboratory is expected to be delivered in Q3 of 2015 and the commercial scale packaging machine is expected to be received in Q4.

We intend to finance the acquisition of these two machines with the credit facility negotiated with BMO as discussed earlier. We plan to hire new personnel in the areas of research and development, quality, manufacturing and administration on an as required basis as we enter into partnership agreements, establish our versatile manufacturing capability and increase our research and development activities.

We are expecting that operations costs will increase and we have budgeted appropriately for these new developments. This new facility will provide opportunity for improved profitability by reducing - by first reducing our dependence on expensive third party manufacturers which will also allow us to protect our manufacturing process knowhow and intellectual property and secondly enabling IntelGenx to offer complete support from concept through research and development, regulatory affairs and commercial supply of versatile end products for our pharmaceutical partners.

This new facility will secure IntelGenx position as the film development partner of choice. I'll now turn the call back to Dr.

Zerbe.

Thank you John. So to summarize where we stand right now, I think we here at IntelGenx and believe that we had a pretty successful second quarter.

Sales of Forfivo increased significantly by 19% and we expect sales to continue to increase. We achieved an important performance milestone by reaching $7 million of net trade sales in the preceding to 12 months which provide milestone payment of $3 million to the company.

We made significant progress with our erectile dysfunction film. This is really to be considered as a breakthrough for this product.

And we are very confident that we will have the product ready for product launch by the time that the substance patent expires. And on the PAR projects we continue to make progress according to the plans, the litigation on the first PAR projects is moving along very well and we are confident that we are coming out of this ahead.

And last but certainly not least we are making very good progress with our manufacturing facility, which is an important element of our growth strategy going forward. Now before I turnover the call for questions I'd like to thank everybody here at IntelGenx for their hard work and contribution and with that I’d like to open up the call for questions.

Good morning Horst.

Good morning RK.

A few questions. Congratulations on the performance milestone from the revenues of Forfivo.

Besides this $3 million performance payment is there any additional revenue milestones you can expect from Edgemont?

Not this year but going forward we expect further milestone payments but certainly not in fiscal 2015. The next one we expect to be achieved some time in 2016 but that is - I mean that is still far out and we’ll have to see how things go.

But we’re pretty confident that Edgemont will reach that.

Okay fantastic. On tadalafil, so it’s good that you’ve got the initial studies done and they’re successful.

So what else is left within the program before you’re ready to file the NDA in 2016?

Yeah, good question RK. The next step will be that we manufacture pivotal batches, meaning batches that are intended to be included in the 505(b)(2) submission and these batches will be used for two purposes, one being to conduct pivotal stability studies and the second activity will be to conduct a pivotal bio study.

This bio study will have merely confirmatory character since the outcome of the study that we just completed was just, so yeah, let me say successful. So these are the two concrete next steps that we have ahead of us with respect to tadalafil.

And what’s the commercialization plan with the tadalafil film?

We will require a commercialization partner and but we are purposely taking our time to find one because our strategy is to de-risk the product at our own expense as much as possible so as to increase the value of the opportunity. We believe that by de-risking the opportunity as much as possible we will be entitled to higher upfront monies and to higher licensing fees.

So we’re not - while we have commenced out-licensing activities, and we’ve begun contacting potential partners, we are not anxious to complete any of these activities any time soon for the reason I mentioned before. But we are very confident because we see extremely high interest in the opportunity that we will sign up a partner most probably in early 2016.

And as we all understand this indication has been lucrative for the industry for a while now, so with you coming with the film I'm sure other people are coming with other things, what kind of competition do you perceive and how do you see that film is a better way to deliver the drug compared to what other folks are thinking?

Yeah, that’s a very important question RK, I'm glad you are bringing this up. And we have to all keep in mind that erectile dysfunction and concurrent with that the product is a lifestyle product.

The product is not intended to be treating a disease in the conventional definition but rather it is, as I mentioned before a lifestyle product and that has, from what we see in our market research a significant impact on the choice of the user of the product. So we believe that by offering a modern elegant product that is not easily perceived as conventional medication like a tablet we will have a significant competitive advantage over the conventional generics that we expect to be launched around the time when the patents for tadalafil expire.

So that is the main, that is one important reason. The second reason is that unlike in situations where we are dealing with a, let me say conventional disease, this is not a product that will be reimbursed by the health insurances.

So any pricing considerations that would have to be made under the aspect of whether or not the product would qualify for reimbursement do not apply here. So we can fully take advantages of the delivery system that I described before.

Those are the two main reasons why, not only ourselves, but also market research predicts this product to be very successful in the market once it’s been launched.

Then the last question from me is on the manufacturing plant in terms of getting the plant commissioned and getting it to into production stage. How do you expect to see the expenses get impacted from here onwards - on for you in the next two to three years?

Going through the commission and going through the production stage and then what kind of benefits do you expect to see out of it?

Well, this is John Durham speaking. Certainly we expect the cost to begin to increase but we’re not hiring armies of people to conduct these activities.

We have been searching for appropriate individuals who can help us with the commissioning the facility I think we’ll need a relatively small number of them. And we will be introducing them to the organization as their skills are required to help us move through the commissioning process.

There will be some additional salaries that have to be paid but some of this will be offset by some additional revenues on the development side of the business because we will now have capability of doing much more development work and will be one of the reasons for expanding the development capabilities to begin taking on more of the development activities. So we’re not anticipating huge increases in expenses and huge drops in profitability.

Thank you gentlemen.

Thanks, good morning everyone. First question the second half of the milestone payment from Edgemont, when you say six months following the first payment, meaning for the $2 million are you implying, it’s going to come in January or December?

I thought we should make that clear?

Yeah, Andre.

Yeah. We’re expecting this milestone payment to be received in January.

I mean there is a slight possibility that we receive it prior to the year-end. But in terms that’s obviously for cash flow purposes.

But in terms of revenue we will be recording the revenue, five-sixth [ph] of the revenue should be recorded in this fiscal year. So basically most of revenue will be recorded this year.

In terms of cash, most likely will be received in January.

I see. Okay, got it.

The next question, on your license revenue $393,000 you reported this quarter am I correct in calculating that around $313,000 of that represents amortization of the extension that you signed with Edgemont late last year?

Yes. You’re right.

Okay. Good.

Could you give us an update on the other products you haven’t discussed, specifically the RIZAPORT migraine product you’re developing with RedHill, your central nervous system product and the hypertension drug?

Yeah, let’s start with the migraine film, rizatriptan, the European application or submission, I should say, is progressing according to plan. The European authority and its handled by the German equivalent to FDA, and has accepted the application for review.

Quite some time to go we announced that event and so the thing is now taking its course, so to speak. There are infrequent requests from the agency which we respond to.

All I can say is that the review is well underway. We do not see any significant or any roadblocks at all.

So we expect to receive European approval as previously announced. On the US side, as I mentioned before, we have qualified a second source of or a second supplier for the API and we now need to manufacture three new submission batches in order to be able to resubmit the application.

And this portion of the project I have to say has been delayed. The reason is basically that the manufacturing of these three new submission batches which is required under FDA guidelines is not inexpensive.

It costs around $1.8 million and our development partner RedHill Biopharma which is responsible for those costs has been reluctant to come up with that money. And so therefore we are looking into alternatives with the intent to reduce the financial burden.

Now, in that respect, we have made pretty significant progress and that progress can be summarized as follows. We have calculated how much the manufacturing of these three submission batches would cost if we manufactured those in our own manufacturing facility which we are currently in the process of establishing, as John just reported and we would be able to reduce that cost down to approximately a third of what the initial cost of $1.8 million would have been and we are right now talking to our partner, RedHill BioPharma about pursuing that path.

It would cost us a slight delay compared to the initial option that delay would be around two months so it’s really not significant and well worth considering the significant savings that we are making with this approach. That is the current status and we hope that we will reach agreement with RedHill on this alternative approach in the very near future.

Okay and then let me just - if I could ask this - that was the alternative supplier that you lined up. So the original supplier for the U.S.

market of the API is out of the picture at the moment, correct?

Well, theoretically not. But practically speaking we do not count on them.

They have, as they have told us implemented all the corrective actions that were required following the inspection of the facility by FDA and they have invited FDA to conduct a re-inspection. However FDA has not shown up at their facility.

We have absolutely no idea nor has the supplier any idea as to when FDA might show up. That may take a while.

This I would like to point out has no impact on the European application because the facility has initially been inspected by both Health Canada and by the Australian regulatory authority; both are members of the mutual recognition treaty under which European authorities recognize the results of other members of that treaty. And so therefore for the European application the material from the initial supplier is clean and acceptable.

Unfortunately FDA is or the U.S. are not member of mutual recognition and so therefore the inspection results of Health Canada and Health Australia are irrelevant for FDA's assessment of the compliance status.

Okay, I understand that. That tells us where we are with the migraine product.

Could you talk about the central nervous system drug? I guess it was a schizophrenia drug?

No, I have not. Those are even though were making good progress, we still consider them early stage.

I can report on the schizophrenia product though that we completed a first pilot bio-study, couple a months ago. We announced that result.

The result was a positive one. It indicated that we have a much faster onset of action then the reference product.

We have since improved or optimized the formulation and have scheduled a second bio-study which will be conducted in October of this year and we expect from that study an outcome in a sense that we will have further sped up the influx of the drug into the blood stream and we have made arrangements with a leading researcher in Germany to conduct Phase 2a study, in other words an efficacy study with this film in schizophrenic patients. We expect that study to be conducted early next year.

So that’s the schizophrenic drug. The second CNS product I really cannot comment on yet, it is very early stage and I cannot disclose the active yet.

Finally, the hypertension product, that we're still trying to find a commercialization partner for that product. We have completed a series of bio-studies that indicate that the product is bio-equivalent with the reference product.

And we are, as we speak, negotiating with two companies in the U.S. that are interested in commercialization rights to this product.

Okay, okay. Great, that covers that.

I noticed that - one more question, I noticed your R&D spending was essentially kind of double the first quarter. Could you talk - is there anything specific within that R&D spend that you'd want to call out to our attention.

And could you tell us what your plans are for the second half of the year in the R&D spend?

Yeah, typically the variability in our - and the big swings, I might say, in our R&D spending comes from clinical studies. And earlier this year we conducted couple of studies.

I mentioned the study on the schizophrenia product. We also conducted that study that I just mentioned with tadalafil.

We also conducted one study with one of the PAR products. And so that's - the timing of these studies usually impacts on our R&D expenses and is mostly responsible for those variations from quarter-to-quarter or from half year to half year.

Hey great. Could you talk about the second half of this year, if you expect that to exceed the first half of this year in total R&D spend, is that a fair question?

I don't have the numbers exactly in front of me. But I don't think that there will be any significant increase over budget.

As I mentioned before, we're planning another bio-study with our schizophrenia product. And we are also planning a bio-study, if I'm not mistaken with the second PAR product.

But to the best of my memory, these studies have been budgeted and so therefore I don't expect any surprises with respect to R&D expenses.

Yeah just to kind to that's - Andre Godin, speaking, just to conclude on what Horst just mentioned, I mean there is a budget that is approved every year by the Board obviously. And we are on target this year to be within the budget in terms of R&D.

And this obviously with the objective to be cash flow breakeven by the end of this fiscal year. So there wouldn't be anything outside of the box that's we're not expecting in R&D from - for the second half of this fiscal year.

Great, thank you.

Good morning Horst and John and welcome on board, Andre. Just a couple of quick questions I think Horst you mentioned earlier, if I am not mistaken that you have a manufacturing third party that’s going to be manufacturing a portion of Suboxone am I correct in remember that you also will be involved in the manufacturing once the facility is up and running?

And secondly could you talk a little bit about the new Director and what the thinking was in bringing on a capital markets merger and acquisition person on the Board? Lastly could you just talk about the makeup of Q2 versus Q1 revenue?

I think it was basically flat from Q1 to Q2 and I know Forfivo sales have been ramping very nicely. So I am just wondering technically why we saw basically a flat revenue quarter?

I will leave the response to your third question to Andre. He is very quick to respond to that.

With respect to the first two questions as far as manufacturing of the PAR products is concerned we have an agreement in place with PAR under which we are entitled to have the right to manufacture portions of the commercial supply of all the products that we are developing for them, that includes the first, second and the third.

Very good, thank you.

Now with respect to second question, first of all Andre we while I really appreciate that he has vast experience with respect to capital markets, that is not the main reason why he came on board, I mean he is just the very experienced financial executive and he will help us greatly as we continue growing the company. With respect to the addition of Clemens Mayr, the new Director, his background or one of his many backgrounds, I might say is mergers and acquisition.

That’s one part of his practice. But he is also very experienced in governance.

We, in the announcement we mentioned that he is currently on the Board of the Institute of Directors here in Canada. So we hired him for his actually breadth of experience, not only in M&A but also and probably even more importantly in governance, because we want to continue our immaculate record with both SEC and the Canadian regulatory authority and also I might say Clemens has significant experience in the healthcare sector.

Generally speaking he has been on the board of other publicly traded healthcare companies, mostly here in Canada. So to summarize we are happy to have Clemens on Board for, really his breadth of experience over various disciplines, not only M&A but besides that also governance and his general experience in the healthcare sector.

And I hope this answers your question, Pat and for the third question I’d like to turn over to Andre.

Yes, in terms of revenue, as you mentioned yeah they seem fairly flat but there is accruals that are taken to the process of recognizing the revenue and sometimes the estimated accrual might be a little bit higher than the actual. So that might have an impact on revenue recognition.

Even though you know the revenue were flat there was an increase in Forfivo sales, as Horst mentioned at the beginning of the call. And obviously the milestone payment that we were expecting in June initially, where we - with that milestone payment we were expecting to have a huge growth in revenue from Q1 to Q2.

Now it’s going to be in Q3. So those are the two reasons why you might have seen flat revenues as opposed to major increase if the milestone was then met a few weeks early.

Okay, very good, thank you, Andre and again welcome aboard.

Thank you.

Well as you know we would like to thank everybody on the call for their continued interest in the company. I’d like to emphasize again that we are very excited to have Andre on board.

He will certainly be very instrumental in leading us through the further growth of the company together with our not so new anymore VP of Operations, who has done a fabulous job in overseeing the growth of the new facility and making sure that it is being completed on time and on budget. And so again thank you very much again.