IntelGenx Technologies Corp.

Stephen Kilmer - IR Dr. Horst Zerbe - President and CEO Andre Godin - EVP and CFO Nadine Paiement - VP, R&D

Swayampakula Ramakanth - H.C. Wainwright Greg Eisen - Singular Research

Thank you, Steve. Good afternoon and welcome to the IntelGenx first quarter 2017 conference call.

On today’s call, I will provide a corporate update and then discuss any progress we made on our key pipeline projects. Following that, Andre Godin will then review our first quarter financial results.

We had a pretty strong quarter in the first quarter of 2017, just to mention signed a couple of new deals. We obtained a license from Eli Lilly and we got another approval for our RIZAPORT product.

With respect to the facility, we commenced finding activities for an 11,000 square foot facility expansion that expansion is necessary to handle additional production volumes that we anticipate from pipeline products. And that expansion will create a fivefold increase in production capacity.

In addition, we will obtain solvent coating capability and finally that expansion provides addition revenue for IntelGenx. Now a few words on our pipeline projects, first with first, tadalafil, tadalafil, as we had mentioned before is indicated for the treatment of erectile dysfunction and pulmonary hypertension, however with our we are only targeting the erectile dysfunction indication.

The film is fully bioequivalent with the brand product Cialis tablets. We completed the manufacturing of the submission batches.

The pivotal pilot biostudy is ongoing and it is nearing completion, actually its technical part is completed and the bioanalytical portion is ongoing. We expect initial unaudited results later this month.

With a successful biostudy, the filing of 505(b)(2) NDA is scheduled for the June, July timeframe. We anticipate an eight to 12 month review time and so consequently U.S.

launch is scheduled for mid-2018. The project at this time is a logical stand driven by IP.

The substance patent is set to expire in November of 2017 and there are three more Orange Book patents protecting the brand product, two of them were invalidated through an IPR process and are currently under appeal. And for the third patent, IntelGenx submitted an IPR with intend to invalidate that IPR lead to a settlement with Eli Lilly.

Under the settlement, we obtained an exclusive license from Lilly for this patent and this settlement includes a covenant not too soon, which provides a free entry pass to product launch, but as I mentioned before [indiscernible] of the substances patent is not affected by the license. The trial with end and applicants that submitted applications for generic copies is scheduled for July, some of the end applicants have already settled with Lilly settled in the sense that they have agreed to launch there generic production only at the expiry of their third patent, the dosing patent that we obtained a license for and that means that we have a pretty good change to enjoy an extended period of [X facility] once we’ve launch our product.

Several companies have expressed interest in licensing the product, term sheets have been submitted and are currently being reviewed and the due-diligence process has commenced. Now a few words on our power project for the indication opioids dependency and that product is entirely driven by litigation.

We had a program for case ongoing last year, and as we reported previously, we won on two patents and lost on third patent. In addition, there was a court proceeding in November of last year on non-Orange Book patent.

We expect the ruling on that case and on that patent very soon in June. Following the case that was litigated last, the case I just mentioned where we won on two and lost on one patent, and TEVA entered into court proceedings for Indivior and Monosol for the very same patents, and they obtained a claim construction ruling that was exactly opposite to the ruling that we obtained on this patent.

Under their ruling, they were non-infringing. We concluded that this simply speaking was not right and filed a motion to reopen our case and ask the judge to reconsider our ruling where we deemed to be infringing and argued that the same ruling of non-infringement that would apply to TEVA should be applied to other case, to other case as well, that motion is currently under consideration by the judge and we are expecting a ruling anytime soon.

Meanwhile, our appeal that we filed for the infringement ruling is on hold pending a ruling on our motion to reopen the case. A few words on our rizatriptan product, we obtained as we announced earlier in the quarter approval for RIZAPORT in Luxembourg under the decentralized European procedure.

And further on in corporation with our co-development partner RedHill, we signed an exclusive licensing agreement with Pharmatronic for the commercialization of RIZAPORT in South Korea, another agreement that we retained manufacturing rights. We anticipate launch of the product in Korea in the first quarter of 2019.

We are working with Grupo Juste, our licensee in Spain on the commercial launch in Spain anticipated launch date is mid-2018 in order to coordinate all launch activities properly with established cross functional launch team with participation from all companies involve, meaning Grupo Juste, IntelGenx and also our development partner RedHill. Resubmission of the 505(b)(2) NDA is scheduled for third quarter of 2017 -- early third quarter of 2017.

And accordingly we expect approval of a product in -- or of the application in the first quarter of 2018. I would like to point out that the approval will trigger a $500,000 milestone payment by RedHill Biopharma.

Partnering discussions for this product are ongoing with additional potential partners Europe, South America and the United States. And began earlier in the quarter, we announced the execution of a development and commercialization agreement with Tetra Bio-Pharma for the development and commercialization of an AdVersa based in a tablet product containing dronabinol.

Dronabinol is THC de-active in the cannabis plant. The product is indicated for the treatment of pain in cancer patients, not responding to chemotherapy.

Market size for cancer pain is approximately $5 billion by 2018. Under the agreement, IntelGenx is responsible for the development and commercial manufacturing of the product.

Tetra is supposed to fund the entire development and it's also responsible for the commercialization of the product. Financial terms of the deal include an upfront payment, milestone payments plus royalty on net sales.

We are not at liberty to disclose any further details of the financial terms. I would like to say few words on this situation because I have received many complaints by investors in the past on the non-disclosure of financial terms in deals.

Now the lack of transparency with respect to financial details of deals is in all these cases and due to confidentiality provisions in those respective agreements, so it's not that we are deliberately withholding information. We're simply not at liberty to provide any financial details.

That is very common in the generic and the drug delivery industry. The simply reason being that confidentiality is key to success in these industries.

Our partners simply are trying to protect their research and development activities and status of their developed activities in order not to lose their competitive advantage. The objective of all this is to be first on the market with the product and particularly in the generic business key to success is being first on the market.

That is the reason why in so many cases we cannot even tough like to provide any financial details on our fields. So, now a few words on Montelukast.

Montelukast is our most important and most advanced drug repurposing opportunity. It is indicated for the treatment of the degenerative diseases of the brain.

The market for this indication currently is access of $5 billion and expects to grow to roughly $13 billion over the next 5 years. We early announced that we successfully completed a phase 1 clinical and we're able to demonstrate that the full administration significantly improves pharmacokinetic profile.

We increased the bioavailability by 52% and demonstrated that the drug successfully crosses the brain barrier, all that in comparison to the reference product and reference product being single layer tablets. We now have had for quite some time a Phase 2A proof of concept study in preparation.

The study will be conducted in mild-to-moderate Alzheimer patient -- I am sorry and patient enrollment is anticipated to commence later this May, it may slip into June. We have to-date seven study sites committed in Canada to conduct the study and seven study sites is the minimum as per our protocol to commence a patient enrollment; however, we haven't reach the planned number of patients and so we continue to try and to commit study sites.

We try to keep the study in Canada and we are trying to avoid not to expand the study into the U.S. for one simple reason, the reason being that if we included U.S.

study sites, we would first have to file for an IND with FDA that would delay the study for another two to three months and we do -- we want to avoid that. We anticipate the study results to be available in the first quarter of 2017, and so commercialization strategy for the product will depend on the outcome of this proof of concept study.

So these remarks conclude the update on progress. As I said before, I am very pleased with the progress we are making with our pipeline products and also with our efforts to transform IntelGenx into a global leader in pharmaceutical or films.

And with that I now like to turn the call over to our CFO, Andre Godin who will review our Q1 2017 financial results. Andre?

Thank you, Horst. Good afternoon everyone.

As Horst mentioned, I will take a few minutes to discuss the Company's financial performance for this quarter. But before I begin, I would like to point out that in April, we file preliminary short form prospectus with respect to an offering the minimum of CAD7 million and a maximum of CAD10 million in convertible on secured debentures.

As I mentioned on our 2016 yearend call, we are fortunate to have the necessary financial resources to continue executing our commercialization plans and other important elements of our growth strategy. That said, we are expanding our manufacturing footprints and capable with this which will not result in our expenses.

While our current cash on hand should be able to take us forward for at least the next four to five quarters. We believe that this structure of the financing will allow us to strengthen our balance sheet, while at the same time we minimized and push out the timing of shareholder dilution.

Our intention is to use the net proceed of this offering for capital expansion, clinical studies, product development and other capital expenditures necessary to grow our business. Now, for our first quarter financial, total revenue for a three month period ended March 31, 2017.

The amount of revenue amounted to approximately 1.4 million which represent an increase of 65% from 818,000 for a three-month period ended 2016. The increase for the three month period ended March 31, 2017 compared to last year corresponding period is mainly attributable to the increase in up front and differed revenues which were offset by small decrease in royalty.

Operating costs and expenses were 1.8 million for the first quarter versus 5.5 million for the corresponding quarter of 2016. Adjusted EBITDA for Q1 2017 was minus 117,000 which is a 79% improvement over 556,000 negative in Q1 2016.

For Q1 2017, the Company adds an operating loss of 457,000, compared to an operating income of 768,0000million for the comparable period of 2016. Net comprehensive loss was 468,000 or $0.01 on a basic and diluted per-share basis three month period ended March 31, 2017, compared to net comprehensive loss of $707,000 or $0.01 on a basic and diluted per-share basis for the 2016.

As of March 31, 2017, the Company's cash, cash equivalents and short-term investments totaled $3.9 million compared to approximately $4.5 million as of December 31, 2016. On that, I will turn now the call back to Dr.

Zerbe to conclude our remarks.

Thank you, Andre. Again, we're most pleased by the progress made in Q1 and the strong start into 2017.

And just to summarize here again the highlights. We optioned national approval for RIZAPORT in Luxembourg under the European decentralized procedure.

We’ve obtained an exclusive license from Eli Lilly for the 166 dosing patent, covering tadalafil erectile dysfunction product. We signed a developed of commercialization agreement with Tetra Bio-Pharma for an adverse of product containing Dronabinol for pain ,management, and we signed an agreement with the Chemo Group for an disclosed CNS tablet program.

And again I would like point out is that none of these accomplishment would have been possible without support of our Board and with our stake holders and most importantly the hard work and dedication of our staff and so heartfelt and thank you to all of you. So thank you all of you for your attention and we will now turn the call over for questions.

Couple of quick questions, so did I hear is correctly that for Montelukast study, you are not planning to do them in the United States?

Let me put it this way, RK, first of all thanks for the question and hi. Let me put in this way, we are trying to avoid using or having to use U.S.

sites, mostly or the reason that I just mentioned and in that case we would have to file an IND and that would delay the process by two or three months and we would like to avoid delay. I think I know why you are asking that question and let me just comment, not involving any U.S.

sites does not have any impact on the acceptability of that study by FDA, so FDA does not care whether the study was fully or partially or not at all conducted in the U.S., they look at other parameters. I think that was the tobacco for your question, right.

So because of I have not -- I don’t know maybe there are some examples and I have to dig it out, but I am not seeing any inside -- that’s why I was going to surprise. And most sponsors normally try to get a study done, but let me ask you in this way.

So I understand, this is a proof-of-concept study you want to make sure, you have a molecule which is a liable molecule commercially. And first of all, in terms of mechanism of action, so do you think once you cross that hurdle and probably you might think about a partner when you go to your registration study.

Do you think at that point you would think about engaging centers in the United States?

Absolutely, I mean keep in mind this is just a Phase 2A a proof-of-concept study. We will have to conduct a full blown Phase 1 study and mostly like we don’t know that yet Phase 3 study.

Those studies will for sure include U.S. sites, there is no doubt about that until we will down the line should meet an IND application just at a stage of the proof of concept study.

We just don’t want to incur any unnecessary delays.

Understood, understood, that might be strategy that should be, which will be helpful both in terms of [Indiscernible]. In terms of the tadalafil product, what are the catalysts that we should look out for?

Know that you have confidence of Eli Lilly. So what are the places you are trying to progress that projects and get to a place where you can be registering commercially, commercial product?

I am sorry RK. You didn’t come through very clearly.

Can you please repeat your question? I'm not sure I understood it properly.

Okay, on the tadalafil project. So what is the next catalyst for that, now that you know you have backing of the Eli Lilly in terms of patents?

So the cannabis obviously will be the submission 505(b)(2) and notification of acceptance before that and the conclusion of the successful completion of the pivotal biostudy that should occur with the next couple of weeks. And those are the main catalyst after that the project will be pending at FDA for review.

Okay thank you, regarding RIZAPORT in the United States, I think I miss that so. Are you still restating the same time line of filing?

Timeline has not changed. We're still on the same timeline.

We're compiling the resubmission file.

Going back to the tadalafil film, could you remind us when does the dosage patent that Lilly holds expire because that seems be the linchpin for giving you exclusivity for generic product before anyone else in the U.S. market?

The 166 dosing patent is a patent that discloses the use of tadalafil film for the treatment of erectile dysfunction in a certain dose range and that dose range is exactly the dose range that is covered by the various strength of the CLS product and that subsequently all the end fliers 505 (b)(2) fliers like ourselves are targeting. And so they are all infringing on that 166 dosing patent because they are using the same dose as disclosed in this patent.

Okay and so when does the 166 patent expire?

2021

That’s pretty good, okay. That gives you a real time to get it going.

You mentioned the catalyst to the previous person's question, the catalyst for tadalafil film. The one catalyst he didn’t mention is bringing on a partner to help you get this out to market.

In terms of timing of when you want to do that, are you flexible to when you want that done, are you waiting for the successful biostudy before you sign a term sheet?

We are in very active discussions with several partners. So these activities run independently from each other, we are progressing the combination of fascination trial, as quickly as possible and at the same time our BD Group is pursuing the discussions with the potential partners.

There is no time relationship or so. These are both top priority activities.

Well, I supposed they should be I guess. I could change the subject to the dronabinol product, you signed an agreement would call for an upfront payments.

Was there an upfront payment on this drug in Q1? Or will that be a Q2 revenue event in 2017?

That was a partial and a portion of the upfront payment was paid in Q1, and I should comment that portion was greater than 50%, and there is a remainder that’s if I am not mistaken is going to be paid in Q2. But Andre might have to comment on that, but my recollection is that that will be paid in Q2.

That exactly right, we have more than 52% that was paid in Q1 and the balance would be -- will be paid in Q2.

Moving right along on RIZAPORT, you now have approval in Luxembourg and Germany, but you do not have a marketing agreement or marketing partner in those countries. You do have a marketing partner in Spain, but correct me if I am wrong, you do not have approval yet in Spain.

Do I have that right?

Yes, you got that right, Greg. The national application in Spain is pending.

And if you recall, I commented on that, on previous calls, that national phase is not another technical review of the dossier. The national phase mainly deals with pricing aspects.

And as all I can say that is currently pending, and so the relevance of the application that -- I am sorry of the approval that we just received from Luxembourg is with that second approval that technical review of dossier is fully completed, and any national phases we have with interest in Germany by the way, you brought up that country. And any subsequent national phases would only deal with pricing aspects.

Throughout the EU?

Yes.

Assuming we still have in EU, which I guess raises the question about UK. It's cyclically still part of EU right now.

Do you have plans for marketing this drug in the UK? And how does the Brexit phenomenon fit in with that plan?

Let me put it that way, there have been discussions about a commercialization deal in the UK, but there is nothing serious ongoing right now.

Okay and I guess following up on what I said earlier, you have approvals in Luxembourg in Germany, but you don’t have partners there. So, it seems like you'd be very close to be and able to go to start marketing the product, but you don’t actually have a partner.

Is there something unique about those two markets that make it difficult to hiring a marketing partner? Or are you just kind waiting to find the right one?

There is indeed a very significant reason and that reason is pricing. Germany is extremely tight on pricing, so why we will see interest, we're talking very completely to one German company and I'm not sure whether we get a deal in Germany.

The way how German authority fixes pricing is as follows. They take the three lowest priced generics of that molecule, in our case rizatriptan and calculate or compute an average of the three lowest priced generic and that’s the price they impose on any new applicant.

And that price is not very attractive and so therefore, we may or may not get a partner in Germany. But what I should add is that this German company is a serious player and they are present not only in Germany, they are present --actually very presence in certain Southern European counties as well like Greece and Italy and others.

And there I do see a very good opportunity for market authorizations. Generally speaking, the entire European market is to a very large extent price driven, Spain is at the upper end.

So another words pricing in Spain is in most cases very favorable and in our particular case it is absolutely very favorable.

Thank you for answering it that way because it really makes it clear kind of why things are happening the way they are happening there in Europe and why it can be slow and difficult. And I think you said before it's probably more attractive obviously in United States, but also in the South America, if I remember correctly.

Yes, that’s correct.

So moving on, regarding the capital raising plans, you filed your prospectus. You said the money would be used for the facilities expansion.

That is correct, but I would like to turn over to Andre. He has mostly been dealing with the race and so he'll answer any questions pertaining to that activity.

Okay. Hi Andre, regarding the capital raising plans and making use of the prospectus and that raising authority, is there kind of a decision point as to whether or not you actually execute on that perspective?

Is it a matter of pricing and what the market will give you in terms of doing? And how much exactly do you -- what's the range of money you think you need to spend on this build out, right now?

Yes, sir obviously, I am right in a middle of marketing. So, I've been very active on that front over the last two weeks.

And part of view with proceed like I mentioned earlier will be for the capital expansion, but I am very optimistic that we will close this financing. And it should attain prudent later.

We decided to go with debenture because it's less dilutive. There will be obviously a premium to conversion and also -- I mean, it's part of an overall strategy.

We will -- also we get a lot of analyst coverage following this raise, so we need more exposure out there. And we like the fact that you do cover the Company, it's really well appreciated as well as actually went right, but we need more analyst coverage for the Company.

So, it's a combination of factors. There is fair a bit allocation of the use of proceed that will be basically for working capital, basically in the bank, it's strengthening our balance sheet which is very important for us, obviously with all the projects that we have, that we have a high cash balance.

So, that’s why we decided to go and raise between $7 million and $10 million.

Yes. Am I correct in thinking that you are raising well an excessive what you need to spend on the build out, as only you are going to raise money, you might not get the good deal more than you need, this is my point?

Yes, you are exactly right. The last thing we want to do is go out and raise money when you need it.

So, yes, we are obviously raising well in access to what we need.

If there are no further questions then I would like to thank everybody on the call again for your attention and we thank you very much. And we appreciate your continued interest in this company.

Thank you.